Don’t Sweat the Rise in the Unemployment Rate

The U.S. unemployment rate ticked up to 6.7% but a broader measure of joblessness actually fell 0.1 percentage point to 12.6%, offering a hint of positive news.

The main reason for the increase in the unemployment rate was a surge in the labor force — the number of people working or looking for work. The labor force jumped by more than half a million people in February. After seeing many months of people giving up looking for work, it could be an indication that more people are coming off the sidelines and back into the labor force.

That development may be especially surprising given the expiration in extended unemployment benefits that hit at the end of last year. Some 1.3 million workers lost those benefits when the program expired, and many of them were expected to become discouraged and drop out of the labor force altogether. It appears that not only have most of those people remained in the labor force, but others may be joining them.

Indeed the number of people unemployed for more than 26 weeks surged by more than 200,000. Sure, that could be due to people moving from 26 weeks to 27, but the labor market was pretty strong six months ago. Job growth was robust and the weekly measures of unemployment applications were at lows for the year. That suggests some of the discouraged long-term unemployed came back into the labor force.

There’s more evidence for that in the drop in the broader unemployment rate. The measure, known as the “U-6″ for its data classification by the Labor Department, has dropped 0.5 percentage point in two months – to the lowest point in more than five years. That rate includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find. The ranks of discouraged workers and those part-time for economic reasons both fell last month.

There were 755,000 discouraged workers in February, the lowest level since April 2009. Those discouraged workers aren’t counted as unemployed or part of the labor force because they didn’t actively look. Meanwhile, there were 7.2 million people working part time but who wanted full-time work. That is still high historically, but it’s at its lowest level since October 2008.

It’s been a very slow process, but it does appear the labor market is beginning to heal.

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